9.1c - Ventures

Question 1

Corporate venturing definition

Answer 1

An agreement between two companies that will see an established company invest in a new company that it believes will have high growth potential

Question 2

What are the alternatives to corporate venturing for a business looking for investors?

Answer 2

• Venture capitalists

- Merchant banks

Question 3

How do corporate ventures work?

Answer 3

The established business will pay for an equity stake in the business and become very active in the decision making process

Question 4

Why would a bigger company want to invest in a smaller company?

Answer 4

• Benefit financially from future success
• Gain access to their IP
• Gain access to skills and talents in their workforce
• Part of a strategy to move into a new industry or market

Question 5

Why do smaller companies welcome investments from larger ones?

Answer 5

Access to:

• Additional funding
• Expertise
• Supply chains
• Operation processes
• Distribution networks

Question 6

Advantages of venture capital:

Answer 6

• Used by high risk start-ups who would struggle to get funding elsewhere
• Venturists may not want to take dividends they are entitled to in order to keep more money in the business

Question 7

Venture capital definition

Answer 7

Funds raised from a corporate venture

Question 8

Disadvantages of venture capital:

Answer 8

• Smaller business has to give up some ownership

- Larger business may have too much influence on the smaller business